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Curious Cat Kivans

Investing and Economics Blog

South Korea will start a 20 trillion won ($22 billion) fund to invest in overseas oil and gas projects, vying with China and India for resources as prices soar. National Pension Service, South Korea’s biggest institutional investor with $235 billion in assets, is in talks with the commerce ministry and government agencies to start the fund by year end, the pension fund’s chief said.

South Korea needs to catch up to China and India, who have scoured the globe to lock in resources to fuel economic growth. Korea, the world’s fifth-largest importer of oil, buys in 97 percent of its energy and resource needs.

This sounds like the type of news that 3 years later everyone says was the sign of a bubble. Today it is hard to tell whether the boom in oil and commodity prices are a bubble or a sign of a huge demand increase that the cannot be supplied at current costs (combined with the plunging dollar which exaggerates the trends – and maybe by a decrease in supply too). I would have to say I am leaning toward a bubble signal but to what extent? Is the average price over the next 5 years going to be $50 a barrel (versus $93 today) versus say $25 a few years ago? Or is that price $100 or $150? In a few years people will say it was obvious today – what are they saying today?

Comments

Oil has fallen to $40 a barrel from nearly $140 less than a year ago. Now that $140 level was the result of a huge spike in the price. But if I owned a bunch of oil (as a country or a company) I sure wouldn’t want to sell it at $40…